Last month's COVER Focus on income protection (IP) mentioned October's introduction of Employment an...
Last month's COVER Focus on income protection (IP) mentioned October's introduction of Employment and Support Allowance (ESA) as a prompt to the public to realise how little state support they would get if they were too ill to work. The debate focused on the conditions for receiving ESA but missed out on the concept change.
The White Paper on Welfare Reform was published in December and James Purnell chose, in making his statement to the Commons, to quote from Herbert Morrison in 1947: "We have no hands or brains to waste, and no resources to fritter away on those who don't contribute to our national effort." The Government's choice to pursue this vision despite the current downturn is hugely refreshing.
Its implementation will involve a massive change for the 2.5 million invalidity benefit claimants. They will be moved onto ESA and divided into two groups: the 'progression to work group' (the majority) and the 'no-conditionality group' (for the most disabled people). The end of 'learnt helplessness' is in sight. And here we have the concept change that many missed - that incapacity will not exist in a few years' time.
For the State, the challenge will be to turn this into reality. The scope for private sector involvement will be immense and the proposals incentivise this through 'invest to save', where providers put money upfront and are paid out of benefit savings; 'accelerator payments', where they get more money for harder to place clients; 'rights to bid', where they can come up with their own innovative schemes; and devolution of funding and power to local levels.
Many insurers in the individual and group sectors have significant in-house and outsourced expertise. If they are successful, they will have the opportunity to move from being a niche market of mainly employer-purchased provision to mainstream activity on a grand scale.
The difficult questions concern IP for people who do not fall into the 'no-conditionality group'. What future do categories such as 'own' and 'suited occupation' have; why should payment be guaranteed to 'retirement'; how should state-funded and premium-funded rehabilitation relate to each other; and ultimately, what is the unique selling point for IP? Maybe the answers lie in convergence between State and private entitlement conditions but divergence between the monthly benefit paid and levels of rehabilitation provided.
The potential to protect people in times of ill health could be much greater in five years' time. If we do not seize the opportunities, it could become even more marginal.
Richard Walsh is managing director of SPPR Consulting.
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